Certificates Issued By Qualified Professionals Like CAs Can’t Be Brushed Aside Merely For Lack Of Corroborative Evidence: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has observed that certificates issued by qualified professionals like cost accountants, chartered accountants, and chartered engineers should not be brushed aside merely with the statement that corroborative evidence was not produced.

The bench of Ramesh Nair (Judicial Member) and C. L. Mahar (Technical Member) has observed that certificates issued by qualified professionals need to be accepted by the department unless investigation is undertaken in doubtful cases and the data is re-verified by appointing its own cost accountant or producing another material on record.

The appellant/assessee is in the manufacturing of nylon chips and pet chips. Polyester chips and nylon chips manufactured by the appellant are used for the manufacture of polyester yarns and nylon yarns at its manufacturing unit, and from time to time, it also clears such polyester and nylon chips to its sister concern units situated at Pune and Mahad and to independent buyers.

The appellant claimed that the nylon chips are hygroscopic in nature, i.e., they absorb moisture from the atmosphere, and these chips are cleared in wet form immediately after they pass through the centrifugal machine. In respect of nylon chips captively consumed for the manufacture of nylon yarns at its manufacturing unit at Rajashree Nagar and nylon chips cleared to its sister units.

The appellant owes excise duty. In terms of Rule 8 of the Valuation Rules, in case the excisable goods are not sold by the assessee but are used for consumption by him in the production or manufacture of other articles, the value shall be 110% of the cost of production of the goods. As per CBEC's Circular No. 692/08/2003, the cost of production of captively consumed goods shall be determined in accordance with CAS-4.

The appellant discharged excise duty, claiming a 9.5% discount from the per-unit cost of production of nylon chips and pet chips determined in CAS-4 issued by the cost accountant towards the weight of moisture contained in the nylon chips and PET chips to arrive at the value of wet nylon chips cleared to its sister units.

The appellant produced CAS-4 certificates issued by the cost accountant for the periods 2007-08, 2008-09, 2009-2010, and 2010-2011. For the years 2009–10 and 2010–11, CAS-4 reflected the net cost of production of wet chips after discounting the per unit cost by 9.5% towards moisture content, the CAS-4 certificates for the years 2007–08 and 2008–09 did not show any such discount. The appellant, in order to prove that the per unit cost determined in the CAS-4 for the years 2007–08 and 2008–09 were actually for the dry chips from which they have not claimed a discount of 9.5% while clearing to their sister units, They also produced another certificate from the cost accountant obtained subsequently, which certified that the cost shown in the CAS-4 certificates for 2007-08 and 2008-09 was in respect of dry chips and certifying that the moisture content in the wet chips cleared from the factory was 9.32% and 9.4%, respectively, of the gross weight of wet chips.

The adjudicating authority, however, was not convinced by the submissions made by the appellant. It confirmed the demand of Rs. 92,28,179 against the appellant under an extended period of limitation, imposing an equal penalty under Section 11AC of the Act, and also demanding applicable interest.

The tribunal held that the original Cost Accountant CAS-4 certificates determined the cost of the dry chips only, and the appellant was entitled to discount the moisture percentage to arrive at the net cost of production. However, it is seen that the discount of 9.5% claimed by the appellant was marginally higher than the wet content of 9.32% or 9.40% arrived at by the cost accountant for the years 2007-08 and 2008-09, respectively. As the whole issue was revenue neutral as any additional duty payable by the appellant was available for Cenvat credit to its sister unit, no malafide can be attributed for this small difference.

Case Title: Rajashree Polyfil Versus Commissioner of Central Excise & ST

Case No.: Excise Appeal No. 11893 of 2013-DB

Date: 08.06.2023

Counsel For Appellant: Sanjay Nair

Counsel For Respondent: Prakash Kumar Singh

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